How to Become an Arbitrator?

Many legal professionals mistakenly believe that only individuals with legal expertise can serve as arbitrators. However, no such legal requirement exists. In reality, anyone can be appointed as an arbitrator.

This blog explores the process of becoming an arbitrator and provides guidance on effectively negotiating and drafting key arbitration agreement clauses. While mastering these skills requires practice, we have outlined essential points to help you get started. Read carefully to gain a strong foundation.

Table of Contents

1. How to Become an Arbitrator?
2. Are All Arbitrators Advocates or Lawyers?
3. How to Professionally Negotiate or Draft Key Clauses in an Arbitration Agreement
   • Choosing a Dispute Resolution Mechanism
   • Opting for Institutional Arbitration
   • Defining the Scope of the Agreement
   • Establishing Custom Rules
   • Pre-Hearing Motions and Pre-Arbitration Hearings
   • Interim Relief Measures
   • Limiting Damages, Costs, Awards, and Fees
   • Dispute Escalation Mechanisms
   • Involving In-House Legal Counsel
   • Other Critical Clauses
4. What Happens When an Arbitrator Is Not Paid?

How to Become an Arbitrator?

Eligibility:

There are no specific eligibility criteria for becoming an arbitrator in India. Any adult of sound mind can be appointed to this role.

Eligibility for Empanelment with Arbitration Institutions:

Different arbitration institutions have their own selection criteria for empaneling arbitrators. These may include qualifications in law, business administration, engineering, or other fields, as deemed relevant. Institutions appoint arbitrators to resolve disputes across various industries.

Appointment Process:

According to Section 6 of the Arbitration and Conciliation Act, 1996, parties involved in a dispute have the freedom to select their arbitrators. If they fail to do so, courts may appoint arbitrators, often retired judges of the High Court or Supreme Court.

If the parties cannot agree on a common arbitrator, a petition can be filed under Section 11(6) of the Act before the appropriate High Court for appointment.

Are All Arbitrators Advocates or Lawyers?

While High Courts often appoint retired judges as arbitrators, they may also select senior advocates, experienced arbitration lawyers, business professionals, chartered accountants, and technical experts. There is no legal mandate requiring arbitrators to have a law degree.

Note: Parties in an arbitration agreement can appoint any individual they choose as their arbitrator.

How to Professionally Negotiate or Draft Key Clauses in an Arbitration Agreement

A well-drafted arbitration agreement is essential for efficient dispute resolution. Consider the following aspects to ensure clarity and enforceability:

Choosing a Dispute Resolution Mechanism:

Evaluate whether arbitration is the best option compared to traditional court litigation. Arbitration may not be suitable for consumer disputes, where forums tend to favor individuals over corporations, or for industrial disputes.

If arbitration is preferred, ensure it is conducted efficiently and cost-effectively. Consider factors like initial filing fees, venue costs, and travel expenses.

For international disputes, arbitration is often a better option than litigating in an unfamiliar foreign court. Countries that are signatories to the New York Convention of 1958 follow uniform arbitration laws, ensuring consistency.

Opting for Institutional Arbitration:

If referring a dispute to an arbitration institution, carefully assess its procedural rules. Different institutions follow distinct frameworks, and being unfamiliar with them may create unnecessary complications.

Additionally, consider cost implications. Arbitration institutions charge various fees, including registration fees. Reviewing their rules in advance helps in budgeting effectively.

Defining the Scope of the Agreement:

Anticipate potential disputes that may arise from the agreement and specify which issues will be resolved through arbitration. A well-defined scope prevents future uncertainty and inefficiencies.

Establishing Custom Rules:

To avoid making arbitration as complex as court proceedings, define rules on evidence submission, witness credibility, and expert testimonies. Section 27 of the Act allows parties to seek court assistance for summoning evidence or witnesses when necessary.

Pre-Hearing Motions and Pre-Arbitration Hearings:

Arbitration rules can include provisions for dismissing frivolous claims early in the process, similar to summary judgments in civil courts. Establishing pre-hearing motions can save time and resources.

Interim Relief Measures:

Courts provide interim relief to protect parties from undue hardship while a case is pending. Arbitration agreements can incorporate similar provisions, allowing arbitrators to grant temporary relief. Otherwise, parties may need to approach courts under Section 9 of the Act.

Limiting Damages, Costs, Awards, and Fees:

Ensure that arbitration agreements specify reasonable limitations on damages and costs. A winning party should receive a fair award, while the losing party should not face excessive financial burdens. The strategic drafting of these clauses can benefit clients in both scenarios.

Dispute Escalation Mechanisms:

Instead of immediately initiating arbitration, parties should attempt to resolve disputes through negotiation. Incorporating a structured escalation process can prevent unnecessary arbitration and reduce costs.

Involving In-House Legal Counsel:

Engaging in-house counsel in arbitration proceedings can be beneficial. They possess in-depth knowledge of the organization’s operations and can contribute to strategy development.

Other Critical Clauses:

Key additional clauses include:

• Naming an arbitral institution if institutional arbitration is preferred.
• Defining the language of proceedings.
• Specifying whether transcripts will be provided and how.
• Choosing the arbitration venue.
• Outlining the procedure for appointing arbitrators and determining their number.
• Including confidentiality clauses.
• Setting realistic timelines for the arbitration process.

What Happens When an Arbitrator Is Not Paid?

Typically, payment issues are avoided as fees are paid in advance or in installments. However, in cases of non-payment, an arbitrator has two options:

1. Include Fees in the Final Award: The arbitrator can make the unpaid fee part of the final arbitration award. When the award is enforced under Section 36 of the Act, the court may direct the party to pay the arbitrator’s fees.
2. File a Recovery Suit: The arbitrator can initiate legal proceedings against the defaulting party to recover unpaid fees.

Conclusion

Arbitration is a flexible and efficient alternative to court litigation. Understanding the role of an arbitrator, drafting effective arbitration agreements, and navigating procedural complexities can significantly enhance the arbitration process. By following these guidelines, parties can ensure smoother dispute resolution while minimising costs and delays.